[Congressional Bills 110th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1133 Introduced in House (IH)]







110th CONGRESS
  1st Session
                                H. R. 1133

      To provide for the energy independence of the United States.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                           February 16, 2007

 Ms. Berkley introduced the following bill; which was referred to the 
   Committee on Ways and Means, and in addition to the Committees on 
Natural Resources, Energy and Commerce, and Science and Technology, for 
a period to be subsequently determined by the Speaker, in each case for 
consideration of such provisions as fall within the jurisdiction of the 
                          committee concerned

_______________________________________________________________________

                                 A BILL


 
      To provide for the energy independence of the United States.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Freedom through Renewable Energy 
Expansion (FREE) Act''.

SEC. 2. REPEAL OF NUCLEAR SUBSIDIES.

    (a) Next Generation Nuclear Plant Project.--Subtitle C of title VI 
of the Energy Policy Act of 2005 (42 U.S.C. 16021 et seq.) and the 
items relating thereto in the table of contents in section 1(b) of that 
Act are repealed.
    (b) Standby Support for Certain Nuclear Plant Delays.--Section 638 
of the Energy Policy Act of 2005 (42 U.S.C. 16014) and the item 
relating thereto in the table of contents in section 1(b) of that Act 
are repealed.
    (c) Repeal of Credit for Production From Advanced Nuclear Power 
Facilities.--
            (1) In general.--Subparagraph (B) of section 45J(d)(1) of 
        the Internal Revenue Code of 1986 (relating to advanced nuclear 
        power facility) is amended by striking ``January 1, 2021'' and 
        inserting ``the date of the enactment of the Freedom through 
        Renewable Energy Expansion (FREE) Act''.
            (2) Effective date.--The amendment made by paragraph (1) 
        shall apply to property placed in service after the date of the 
        enactment of this Act.

SEC. 3. REPEAL OF CERTAIN TAX SUBSIDIES FOR THE OIL AND GAS INDUSTRY.

    (a) Repeal of Election To Expense Certain Refineries.--
            (1) In general.--Subparagraph (B) of section 179C(c)(1) of 
        the Internal Revenue Code of 1986 (relating to qualified 
        refinery property) is amended by striking ``January 1, 2012'' 
        and inserting ``the date of the enactment of the Freedom 
        through Renewable Energy Expansion (FREE) Act''.
            (2) Effective date.--The amendment made by paragraph (1) 
        shall apply to property placed in service after the date of the 
        enactment of this Act.
    (b) Repeal of Treatment of Natural Gas Distribution Lines as 15-
Year Property.--
            (1) In general.--Clause (viii) of section 168(e)(3)(E) of 
        such Code (relating to 15-year property) is amended by striking 
        ``January 1, 2011'' and inserting ``the Freedom through 
        Renewable Energy Expansion (FREE) Act''.
            (2) Effective date.--The amendment made by paragraph (1) 
        shall apply to property placed in service after the date of the 
        enactment of this Act.
    (c) Repeal of Treatment of Natural Gas Gathering Lines as 7-Year 
Property.--
            (1) In general.--Clause (iv) of section 168(e)(3)(C) of 
        such Code (relating to 7-year property) is amended by inserting 
        ``and which is placed in service before the date of the 
        enactment of the Freedom through Renewable Energy Expansion 
        (FREE) Act'' after ``April 11, 2005,''.
            (2) Effective date.--The amendment made by paragraph (1) 
        shall apply to property placed in service after the date of the 
        enactment of this Act.
    (d) Repeal of New Rule for Determining Small Refiner Exception to 
Oil Depletion Deduction.--
            (1) In general.--Paragraph (4) of section 613A(d) of such 
        Code (relating to certain refiners excluded) is amended to read 
        as follows:
            ``(4) Certain refiners excluded.--If the taxpayer or a 
        related person engages in the refining of crude oil, subsection 
        (c) shall not apply to such taxpayer if on any day during the 
        taxable year the refinery runs of the taxpayer and such person 
        exceed 50,000 barrels.''.
            (2) Effective date.--The amendment made by paragraph (1) 
        shall apply to taxable years beginning after the date of the 
        enactment of this Act.
    (e) Repeal of Amortization of Geological and Geophysical 
Expenditures.--
            (1) In general.--Section 167 of such Code (relating to 
        depreciation) is amended by striking subsection (h) and 
        redesignating subsection (i) as subsection (h).
            (2) Conforming amendment.--Section 263A(c)(3) of such Code 
        is amended by striking ``167(h),''.
            (3) Effective date.--The amendments made by this subsection 
        shall apply to amounts paid or incurred after the date of the 
        enactment of this Act.

SEC. 4. REPEAL OF CERTAIN PROVISIONS OF THE ENERGY POLICY ACT OF 2005 
              AND OTHER LAWS PROVIDING INCENTIVES FOR OIL AND GAS 
              PRODUCTION FROM FEDERAL LANDS.

    (a) Repeals.--The following provisions of the Energy Policy Act of 
2005, and the items relating thereto in the table of contents in 
section 1(b) of that Act, are repealed:
            (1) Section 343 (relating to marginal property production 
        incentives).
            (2) Section 344 (relating to incentives for natural gas 
        production from deep wells in the shallow waters of the Gulf of 
        Mexico).
            (3) Section 345 (relating to royalty relief for deep water 
        production).
            (4) Section 357 (relating to comprehensive inventory of OCS 
        oil and natural gas resources).
            (5) Section 362 (relating to management of Federal oil and 
        gas leasing programs, including expediting leases and permit 
        applications).
            (6) Section 965 (relating to oil and gas research 
        programs).
            (7) Section 966 (relating to low-volume oil and gas 
        reservoir research program).
            (8) Subtitle J of title IX (relating to ultra-deepwater and 
        unconventional natural gas and other petroleum resources).
    (b) Repeal of Alaska Offshore Royalty Suspension.--Section 
8(a)(3)(B) of the Outer Continental Shelf Lands Act (43 U.S.C. 
1337(a)(3)(B)) is amended by striking ``and in the Planning Areas 
offshore Alaska''.
    (c) Repeal of Royalty Suspension With Respect to National Petroleum 
Reserve in Alaska.--Section 107 of the Naval Petroleum Reserves 
Production Act of 1976 (as amended by section 347(b)(11) of the Energy 
Policy Act of 2005 (119 Stat. 706)) is amended by repealing subsection 
(k).
    (d) Conforming Amendment.--Section 961(c) of the Energy Policy Act 
of 2005 (42 U.S.C. 16291(c)) is amended by striking paragraph (3) and 
redesignating paragraph (4) as paragraph (3).

SEC. 5. PRICE THRESHOLDS FOR ROYALTY SUSPENSION PROVISIONS.

    The Secretary of the Interior shall agree to a request by any 
lessee to amend any lease issued for any Central and Western Gulf of 
Mexico tract during the period of January 1, 1998, through December 31, 
1999, to incorporate price thresholds applicable to royalty suspension 
provisions, that are equal to or less than the price thresholds 
described in clauses (v) through (vii) of section 8(a)(3)(C) of the 
Outer Continental Shelf Lands Act (43 U.S.C. 1337(a)(3)(C)). Any 
amended lease shall impose the new or revised price thresholds 
effective October 1, 2006. Existing lease provisions shall prevail 
through September 30, 2006.

SEC. 6. CLARIFICATION OF AUTHORITY TO IMPOSE PRICE THRESHOLDS FOR 
              CERTAIN LEASE SALES.

    Congress reaffirms the authority of the Secretary of the Interior 
under section 8(a)(1)(H) of the Outer Continental Shelf Lands Act (43 
U.S.C. 1337(a)(1)(H)) to vary, based on the price of production from a 
lease, the suspension of royalties under any lease subject to section 
304 of the Outer Continental Shelf Deep Water Royalty Relief Act 
(Public Law 104-58; 43 U.S.C. 1337 note).

SEC. 7. ELIGIBILITY FOR NEW LEASES AND THE TRANSFER OF LEASES; 
              CONSERVATION OF RESOURCES FEES.

    (a) Issuance of New Leases.--
            (1) In general.--The Secretary shall not issue any new 
        lease that authorizes the production of oil or natural gas in 
        the Gulf of Mexico under the Outer Continental Shelf Lands Act 
        (43 U.S.C. 1331 et seq.) to a person described in paragraph (2) 
        unless--
                    (A) the person has renegotiated each covered lease 
                with respect to which the person is a lessee, to modify 
                the payment responsibilities of the person to include 
                price thresholds that are equal to or less than the 
                price thresholds described in clauses (v) through (vii) 
                of section 8(a)(3)(C) of the Outer Continental Shelf 
                Lands Act (43 U.S.C. 1337(a)(3)(C)); or
                    (B) the person has--
                            (i) paid all fees established by the 
                        Secretary under subsection (b) that are due 
                        with respect to each covered lease for which 
                        the person is a lessee; or
                            (ii) entered into an agreement with the 
                        Secretary under which the person is obligated 
                        to pay such fees.
            (2) Persons described.--A person referred to in paragraph 
        (1) is a person that--
                    (A) is a lessee that--
                            (i) holds a covered lease on the date on 
                        which the Secretary considers the issuance of 
                        the new lease; or
                            (ii) was issued a covered lease before the 
                        date of enactment of this Act, but transferred 
                        the covered lease to another person or entity 
                        (including a subsidiary or affiliate of the 
                        lessee) after the date of enactment of this 
                        Act; or
                    (B) any other person or entity who has any direct 
                or indirect interest in, or who derives any benefit 
                from, a covered lease;
            (3) Multiple lessees.--
                    (A) In general.--For purposes of paragraph (1), if 
                there are multiple lessees that own a share of a 
                covered lease, the Secretary may implement separate 
                agreements with any lessee with a share of the covered 
                lease that modifies the payment responsibilities with 
                respect to the share of the lessee to include price 
                thresholds that are equal to or less than the price 
                thresholds described in clauses (v) through (vii) of 
                section 8(a)(3)(C) of the Outer Continental Shelf Lands 
                Act (43 U.S.C. 1337(a)(3)(C)).
                    (B) Treatment of share as covered lease.--Beginning 
                on the effective date of an agreement under 
                subparagraph (A), any share subject to the agreement 
                shall not constitute a covered lease with respect to 
                any lessees that entered into the agreement.
    (b) Conservation of Resources Fees.--
            (1) In general.--Not later than 60 days after the date of 
        enactment of this Act, the Secretary of the Interior by 
        regulation shall establish--
                    (A) a conservation of resources fee for producing 
                Federal oil and gas leases in the Gulf of Mexico; and
                    (B) a conservation of resources fee for 
                nonproducing Federal oil and gas leases in the Gulf of 
                Mexico.
            (2) Producing lease fee terms.--The fee under paragraph 
        (1)(A)--
                    (A) subject to subparagraph (C), shall apply to 
                covered leases that are producing leases;
                    (B) shall be set at $9 per barrel for oil and $1.25 
                per million Btu for gas, respectively, in 2005 dollars; 
                and
                    (C) shall apply only to production of oil or gas 
                occurring--
                            (i) in any calendar year in which the 
                        arithmetic average of the daily closing prices 
                        for light sweet crude oil on the New York 
                        Mercantile Exchange (NYMEX) exceeds $34.73 per 
                        barrel for oil and $4.34 per million Btu for 
                        gas in 2005 dollars; and
                            (ii) on or after October 1, 2006.
            (3) Nonproducing lease fee terms.--The fee under paragraph 
        (1)(B)--
                    (A) subject to subparagraph (C), shall apply to 
                leases that are nonproducing leases;
                    (B) shall be set at $3.75 per acre per year in 2005 
                dollars; and
                    (C) shall apply on and after October 1, 2006.
            (4) Treatment of receipts.--Amounts received by the United 
        States as fees under this subsection shall be treated as 
        offsetting receipts.
    (c) Transfers.--A lessee or any other person who has any direct or 
indirect interest in, or who derives a benefit from, a lease shall not 
be eligible to obtain by sale or other transfer (including through a 
swap, spinoff, servicing, or other agreement) any covered lease, the 
economic benefit of any covered lease, or any other lease for the 
production of oil or natural gas in the Gulf of Mexico under the Outer 
Continental Shelf Lands Act (43 U.S.C. 1331 et seq.), unless--
            (1) the lessee or other person has--
                    (A) renegotiated all covered leases of the lessee 
                or other person; and
                    (B) entered into an agreement with the Secretary to 
                modify the terms of all covered leases of the lessee or 
                other person to include limitations on royalty relief 
                based on market prices that are equal to or less than 
                the price thresholds described in clauses (v) through 
                (vii) of section 8(a)(3)(C) of the Outer Continental 
                Shelf Lands Act (43 U.S.C. 1337(a)(3)(C)); or
            (2) the lessee or other person has--
                    (A) paid all fees established by the Secretary 
                under subsection (b) that are due with respect to each 
                covered lease for which the person is a lessee; or
                    (B) entered into an agreement with the Secretary 
                under which the person is obligated to pay such fees.
    (d) Definitions.--In this section--
            (1) Covered lease.--The term ``covered lease'' means a 
        lease for oil or gas production in the Gulf of Mexico that is--
                    (A) in existence on the date of enactment of this 
                Act;
                    (B) issued by the Department of the Interior under 
                section 304 of the Outer Continental Shelf Deep Water 
                Royalty Relief Act (43 U.S.C. 1337 note; Public Law 
                104-58); and
                    (C) not subject to limitations on royalty relief 
                based on market price that are equal to or less than 
                the price thresholds described in clauses (v) through 
                (vii) of section 8(a)(3)(C) of the Outer Continental 
                Shelf Lands Act (43 U.S.C. 1337(a)(3)(C)).
            (2) Lessee.--The term ``lessee'' includes any person or 
        other entity that controls, is controlled by, or is in or under 
        common control with, a lessee.
            (3) Secretary.--The term ``Secretary'' means the Secretary 
        of the Interior.

SEC. 8. AVERAGE FUEL ECONOMY STANDARDS.

    (a) In General.--Section 32902 of title 49, United States Code, is 
amended--
            (1) in subsection (c)--
                    (A) by striking ``(1) Subject to paragraph (2) of 
                this subsection, the'' and inserting ``The''; and
                    (B) by striking paragraph (2); and
            (2) by redesignating subsections (i) and (j) as subsections 
        (j) and (k), respectively, and by inserting after subsection 
        (h) the following:
    ``(i) Standards for Model Years After 2009.--The Secretary of 
Transportation shall prescribe by regulation average fuel economy 
standards for passenger automobiles manufactured by a manufacturer in 
model years after model year 2009, that shall--
            ``(1) ensure that the average fuel economy achieved by 
        passenger automobiles manufactured by a manufacturer in model 
        years after 2016 is no less than 33 miles per gallon;
            ``(2) ensure that improvements to fuel economy standards do 
        not degrade the safety of passenger automobiles manufactured by 
        a manufacturer; and
            ``(3) maximize the retention of jobs in the automobile 
        manufacturing sector of the United States.''.
    (b) Conforming Amendments.--Section 32902 of title 49, United 
States Code, is further amended--
            (1) in subsection (g)(2), by striking ``(and submit the 
        amendment to Congress when required under subsection (c)(2) of 
        this section)''; and
            (2) in subsection (k) (as so redesignated) by striking ``or 
        (g)'' and inserting ``(g), or (i)''.

SEC. 9. RENEWABLE ELECTRICITY PRODUCTION CREDIT.

    (a) In General.--Section 45(d) of the Internal Revenue Code of 1986 
(relating to qualified facilities) is amended by striking ``January 1, 
2009'' each place it appears in paragraphs (1), (2), (3), (4), (5), 
(6), and (7) and inserting ``January 1, 2016''.
    (b) Effective Date.--The amendments made by subsection (a) shall 
apply to property placed in service after the date of the enactment of 
this Act.

SEC. 10. EXTENSION AND MODIFICATION OF INVESTMENT TAX CREDIT WITH 
              RESPECT TO SOLAR ENERGY PROPERTY, QUALIFIED FUEL CELL 
              PROPERTY, AND GEOTHERMAL PROPERTY.

    (a) Solar Energy Property.--Paragraphs (2)(A)(i)(II) and (3)(A)(ii) 
of section 48(a) of the Internal Revenue Code of 1986 are each amended 
by striking ``January 1, 2009'' and inserting ``January 1, 2016''.
    (b) Eligible Fuel Cell Property.--Paragraph (1)(E) of section 48(c) 
of such Code is amended by striking ``December 31, 2008'' and inserting 
``December 31, 2015''.
    (c) Geothermal Property.--Paragraph (2)(A)(i) of section 48(a) of 
such Code is amended by striking ``and'' at the end of subclause (II) 
and by adding at the end the following new subclause:
                                    ``(IV) energy property described in 
                                paragraph (3)(A)(iii) but only with 
                                respect to periods ending before 
                                January 1, 2016, and''.
    (d) Effective Date.--The amendments made by this section shall 
apply to property placed in service after the date of the enactment of 
this Act.

SEC. 11. EXTENSION OF CREDIT FOR RESIDENTIAL ENERGY EFFICIENT PROPERTY.

    (a) Extension.--Subsection (g) of section 25D of the Internal 
Revenue Code of 1986 (relating to termination) is amended by striking 
``December 31, 2008'' and inserting ``December 31, 2015''.
    (b) Effective Date.--The amendments made by this section shall 
apply to property placed in service after the date of the enactment of 
this Act.

SEC. 12. CREDIT FOR WIND ENERGY PROPERTY INSTALLED IN RESIDENCES AND 
              BUSINESSES.

    (a) In General.--Subpart B of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 is amended by inserting after 
section 30C the following new section:

``SEC. 30D. WIND ENERGY PROPERTY.

    ``(a) Allowance of Credit.--There shall be allowed as a credit 
against the tax imposed by this chapter for the taxable year an amount 
equal to 30 percent (10 percent after December 31, 2015) of the amount 
paid or incurred by the taxpayer for qualified wind energy property 
placed in service or installed during such taxable year.
    ``(b) Limitation.--No credit shall be allowed under subsection (a) 
unless at least 50 percent of the energy produced annually by the 
qualified wind energy property is consumed on the site on which the 
property is placed in service or installed.
    ``(c) Qualified Wind Energy Property.--For purposes of this 
section, the term qualified wind energy property means a qualifying 
wind turbine if--
            ``(1) such turbine is placed in service or installed on or 
        in connection with property located in the United States,
            ``(2) in the case of an individual, the property on or in 
        connection with which such turbine is installed is a dwelling 
        unit which is located in the United States,
            ``(3) the original use of such turbine commences with the 
        taxpayer, and
            ``(4) such turbine carries at least a 5-year limited 
        warranty covering defects in design, material, or workmanship, 
        and, for property that is not installed by the taxpayer, at 
        least a 5-year limited warranty covering defects in 
        installation.
    ``(d) Other Definitions.--For purposes of this section:
            ``(1) Qualifying wind turbine.--The term qualifying wind 
        turbine means a wind turbine of 100 kilowatts of rated capacity 
        or less which meets the latest performance rating standards 
        published by the American Wind Energy Association and which is 
        used to generate electricity.
            ``(2) Principal residence.--The term principal residence 
        shall have the same meaning as when used in section 121.
    ``(e) Limitation Based on Amount of Tax.--
            ``(1) In general.--The credit allowed under subsection (a) 
        for any taxable year shall not exceed the excess of--
                    ``(A) the sum of the regular tax liability (as 
                defined in section 26(b)) plus the tax imposed by 
                section 55, over
                    ``(B) the sum of the credits allowable under this 
                part (other than under this section and subpart C 
                thereof, relating to refundable credits) and section 
                1397E.
            ``(2) Carryover of unused credit.--If the credit allowable 
        under subsection (a) exceeds the limitation imposed by 
        paragraph (1) for such taxable year, such excess shall be 
        carried to the succeeding taxable year and added to the credit 
        allowable under subsection (a) for such taxable year.
    ``(f) Special Rules.--For purposes of this section:
            ``(1) Tenant-stockholder in cooperative housing 
        corporation.--In the case of an individual who is a tenant-
        stockholder (as defined in section 216(b)(2)) in a cooperative 
        housing corporation (as defined in section 216(b)(1)), such 
        individual shall be treated as having paid his tenant-
        stockholder's proportionate share (as defined in section 
        216(b)(3)) of any expenditures paid or incurred for qualified 
        wind energy property by such corporation, and such credit shall 
        be allocated appropriately to such individual.
            ``(2) Condominiums.--
                    ``(A) In general.--In the case of an individual who 
                is a member of a condominium management association 
                with respect to a condominium which he owns, such 
                individual shall be treated as having paid his 
                proportionate share of expenditures paid or incurred 
                for qualified wind energy property by such association, 
                and such credit shall be allocated appropriately to 
                such individual.
                    ``(B) Condominium management association.--For 
                purposes of this paragraph, the term condominium 
                management association means an organization which 
                meets the requirements of section 528(c)(2) with 
                respect to a condominium project of which substantially 
                all of the units are used by individuals as residences.
    ``(g) Basis Adjustment.--For purposes of this subtitle, if a credit 
is allowed under this section for any expenditure with respect to a 
residence or other property, the basis of such residence or other 
property shall be reduced by the amount of the credit so allowed.''.
    (b) Conforming Amendment.--Subsection (a) of section 1016 of such 
Code (relating to general rule for adjustments to basis) is amended by 
striking ``and'' at the end of paragraph (36), by striking the period 
at the end of paragraph (37) and inserting ``, and'', and by adding at 
the end the following new paragraph:
            ``(38) in the case of a residence or other property with 
        respect to which a credit was allowed under section 30D, to the 
        extent provided in section 30D(g).''.
    (c) Clerical Amendment.--The table of sections for subpart B of 
part IV of subchapter A of chapter 1 of such Code is amended by 
inserting after the item relating to section 30C the following new 
item:

``Sec. 30D. Wind energy property.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to property placed in service or installed after December 31, 
2006, in taxable years ending after such date.

SEC. 13. GEOTHERMAL RESEARCH.

    There are authorized to be appropriated to the Secretary of Energy 
$32,500,000 for geothermal research.

SEC. 14. RENEWABLE PORTFOLIO STANDARD.

    Title VI of the Public Utility Regulatory Policies Act of 1978 (16 
U.S.C. 2601 et seq.) is amended by adding at the end the following:

``SEC. 610. FEDERAL RENEWABLE PORTFOLIO STANDARD.

    ``(a) Renewable Energy Requirement.--
            ``(1) In general.--Each electric utility that sells 
        electricity to electric consumers shall obtain a percentage of 
        the base amount of electricity it sells to electric consumers 
        in any calendar year from new renewable energy or existing 
        renewable energy. The percentage obtained in a calendar year 
        shall not be less than the amount specified in the following 
        table:

``Calendar year:                             Minimum annual percentage:
    2008 through 2009.............................                 5.0 
    2010 through 2011.............................                 8.0 
    2012 through 2013.............................                11.0 
    2014 through 2015.............................                15.0 
    2016 and thereafter...........................                20.0.
            ``(2) Means of compliance.--An electric utility shall meet 
        the requirements of paragraph (1) by--
                    ``(A) generating electric energy using new 
                renewable energy or existing renewable energy;
                    ``(B) purchasing electric energy generated by new 
                renewable energy or existing renewable energy;
                    ``(C) purchasing renewable energy credits issued 
                under subsection (b); or
                    ``(D) a combination of the foregoing.
    ``(b) Renewable Energy Credit Trading Program.--Not later than 
January 1 of the first calendar year beginning after the enactment of 
this Act, the Secretary shall establish a renewable energy credit 
trading program to permit an electric utility that does not generate or 
purchase enough electric energy from renewable energy to meet its 
obligations under subsection (a)(1) to satisfy such requirements by 
purchasing sufficient renewable energy credits.
    ``(c) Enforcement.--
            ``(1) Civil penalties.--Any electric utility that fails to 
        meet the renewable energy requirements of subsection (a) shall 
        be subject to a civil penalty.
            ``(2) Amount of penalty.--The amount of the civil penalty 
        shall be determined by multiplying the number of kilowatt-hours 
        of electric energy sold to electric consumers in violation of 
        subsection (a) by the greater of 1.5 cents (adjusted for 
        inflation under subsection (f)) or 200 percent of the average 
        market value of renewable energy credits during the year in 
        which the violation occurred.
            ``(3) Mitigation or waiver.--The Secretary may mitigate or 
        waive a civil penalty under this subsection if the electric 
        utility was unable to comply with subsection (a) for reasons 
        outside of the reasonable control of the utility. The Secretary 
        shall reduce the amount of any penalty determined under 
        paragraph (2) by an amount paid by the electric utility to a 
        State for failure to comply with the requirement of a State 
        renewable energy program if the State requirement is greater 
        than the applicable requirement of subsection (a).
            ``(4) Procedure for assessing penalty.--The Secretary shall 
        assess a civil penalty under this subsection in accordance with 
        the procedures prescribed by section 333(d) of the Energy 
        Policy and Conservation Act (42 U.S.C. 6303(d)).
    ``(d) Rules.--The Secretary shall issue rules implementing this 
section not later than 1 year after the date of enactment of this 
section.
    ``(e) Exemptions.--This section shall not apply in any calendar 
year to an electric utility--
            ``(1) that sold less than 4,000,000 megawatt-hours of 
        electric energy to electric consumers during the preceding 
        calendar year; or
            ``(2) in Hawaii.
    ``(f) Inflation Adjustment.--Not later than December 31 of each 
year beginning in 2009, the Secretary shall adjust for inflation the 
amount of the civil penalty per kilowatt-hour under subsection (c)(2).
    ``(g) State Programs.--Nothing in this section shall diminish any 
authority of a State or political subdivision thereof to adopt or 
enforce any law or regulation respecting renewable energy, but, except 
as provided in subsection (c)(3), no such law or regulation shall 
relieve any person of any requirement otherwise applicable under this 
section. The Secretary, in consultation with States having such 
renewable energy programs, shall, to the maximum extent practicable, 
facilitate coordination between the Federal program and State programs.
    ``(h) Definitions.--For purposes of this section:
            ``(1) Base amount of electricity.--The term `base amount of 
        electricity' means the total amount of electricity sold by an 
        electric utility to electric consumers in a calendar year, 
        excluding--
                    ``(A) electricity generated by a hydroelectric 
                facility (including a pumped storage facility but 
                excluding incremental hydropower); and
                    ``(B) electricity generated through the 
                incineration of municipal solid waste.
            ``(2) Distributed generation facility.--The term 
        `distributed generation facility' means a facility at a 
        customer site.
            ``(3) Existing renewable energy.--The term `existing 
        renewable energy' means, except as provided in paragraph 
        (7)(B), electric energy generated at a facility (including a 
        distributed generation facility) placed in service prior to the 
        date of enactment of this section from solar, wind, or 
        geothermal energy; ocean energy; biomass (as defined in section 
        203(a) of the Energy Policy Act of 2005); or landfill gas.
            ``(4) Geothermal energy.--The term `geothermal energy' 
        means energy derived from a geothermal deposit (within the 
        meaning of section 613(e)(2) of the Internal Revenue Code of 
        1986).
            ``(5) Incremental geothermal production.--
                    ``(A) In general.--The term `incremental geothermal 
                production' means for any year the excess of--
                            ``(i) the total kilowatt hours of 
                        electricity produced from a facility (including 
                        a distributed generation facility) using 
                        geothermal energy, over
                            ``(ii) the average annual kilowatt hours 
                        produced at such facility for 5 of the previous 
                        7 calendar years before the date of enactment 
                        of this section after eliminating the highest 
                        and the lowest kilowatt hour production years 
                        in such 7-year period.
                    ``(B) Special rule.--A facility described in 
                subparagraph (A) which was placed in service at least 7 
                years before the date of enactment of this section 
                shall commencing with the year in which such date of 
                enactment occurs, reduce the amount calculated under 
                subparagraph (A)(ii) each year, on a cumulative basis, 
                by the average percentage decrease in the annual 
                kilowatt hour production for the 7-year period 
                described in subparagraph (A)(ii) with such cumulative 
                sum not to exceed 30 percent.
            ``(6) Incremental hydropower.--The term `incremental 
        hydropower' means additional energy generated as a result of 
        efficiency improvements or capacity additions made on or after 
        the date of enactment of this section or the effective date of 
        an existing applicable State renewable portfolio standard 
        program at a hydroelectric facility that was placed in service 
        before that date. The term does not include additional energy 
        generated as a result of operational changes not directly 
        associated with efficiency improvements or capacity additions. 
        Efficiency improvements and capacity additions shall be 
        measured on the basis of the same water flow information used 
        to determine a historic average annual generation baseline for 
        the hydroelectric facility and certified by the Secretary or 
        the Federal Energy Regulatory Commission.
            ``(7) New renewable energy.--The term `new renewable 
        energy' means--
                    ``(A) electric energy generated at a facility 
                (including a distributed generation facility) placed in 
                service on or after January 1, 2003, from--
                            ``(i) solar, wind, or geothermal energy or 
                        ocean energy;
                            ``(ii) biomass (as defined in section 
                        203(a) of the Energy Policy Act of 2005);
                            ``(iii) landfill gas; or
                            ``(iv) incremental hydropower; and
                    ``(B) for electric energy generated at a facility 
                (including a distributed generation facility) placed in 
                service prior to the date of enactment of this 
                section--
                            ``(i) the additional energy above the 
                        average generation in the 3 years preceding the 
                        date of enactment of this section at the 
                        facility from--
                                    ``(I) solar or wind energy or ocean 
                                energy;
                                    ``(II) biomass (as defined in 
                                section 203(a) of the Energy Policy Act 
                                of 2005);
                                    ``(III) landfill gas; or
                                    ``(IV) incremental hydropower.
                            ``(ii) the incremental geothermal 
                        production.
            ``(8) Ocean energy.--The term `ocean energy' includes 
        current, wave, tidal, and thermal energy.
    ``(i) Sunset.--This section expires on December 31, 2031.''.

SEC. 15. FEDERAL ENERGY PURCHASE REQUIREMENT.

    Section 203(a) of the Energy Policy Act of 2005 (42 U.S.C. 
15852(a)) is amended--
            (1) by striking ``seek to ensure that, to the extent 
        economically feasible and technically practicable'' and 
        inserting ``ensure that'';
            (2) in paragraph (1), by striking ``3 percent in fiscal 
        years 2007 through 2009'' and inserting ``3 percent in fiscal 
        year 2007 and 5 percent in fiscal years 2008 through 2010'';
            (3) in paragraph (2), by striking ``5 percent in fiscal 
        years 2010 through 2012'' and inserting ``11 percent in fiscal 
        years 2011 through 2014''; and
            (4) in paragraph (3), by striking ``7.5 percent in fiscal 
        year 2013'' and inserting ``20 percent in fiscal year 2015''.

SEC. 16. SCHOOL RENEWABLE ENERGY USE.

    The Secretary of Energy shall establish a program to make grants to 
local schools and school districts to promote and facilitate the use of 
renewable energy sources in school facilities.
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